24 Pages Posted: 18 Nov 2011
Date Written: July 15, 2011
We know the names: Bernard Madoff, Kenneth Lay, Jeffrey Skilling, Andrew Fastow, Dennis Kozlowski, Phillip R. Bennett, and Bernard Ebbers. These are but a few of the biggest corporate thieves in recent memory. Similarly, the names of certain corporations will also conjure up lasting images of massive corporate frauds: Enron, World-Com, Tyco, Adelphia, Refco, Global Crossing, and Sunbeam, again, to name just a few.
The most disquieting aspect of all these financial frauds really isn‘t the massive amounts of money that was looted from the victimized companies. Instead, the truly unnerving fact regarding most financial frauds is that they are deceptively easy to formulate and sometimes even easier to implement.
In this piece, I will first give several definitions as to what constitutes fraud. I will next argue how and why committing certain types of financial fraud is in fact fairly simple. In doing so, I must point out that I am not deliberately giving a clinic on how to commit fraud (title notwithstanding) and live happily ever after in a nice offshore tax shelter. That said, keep in mind that in order for forensic accountants and fraud investigators to successfully detect and prevent fraud, they necessarily need to have some idea of how a financial crime might be perpetrated. This knowledge is essential in order to beat the bad guys at their own game. Or, to put it another way, in order to catch a criminal, one has to think like a criminal.
Finally, I will give my take on several factors that enable people to commit financial fraud, including weak internal controls, corporate cronyism, and negligent audits, to name a few.
Suggested Citation: Suggested Citation
Gilmore, Harvey, This is Not a Symposium on How to Commit Fraud - But, If it Were... (July 15, 2011). Journal of Business & Securities Law, Vol. 11, No. 2, 2011. Available at SSRN: https://ssrn.com/abstract=1961435
By Nizan Packin